Monday, October 01, 2012

Daily Market Commentary: Indices Couldn't Hold Gains

A bright start to the day had offered hope for bulls that the swing low had come early.  In an odd contradiction, 20-day MAs played both as support and as resistance.

On the support side were Large Cap indices. The S&P traded the past four days at its 20-day MA and continued to use it as a foot hold for a rally. Supporting technicals remained mixed with 'sell' triggers for the MACD and On-Balance-Volume firmly in play, but the Directional Index swinging bullish (although trend strength is weakening). I suspect the 20-day MA will give way as support and bulls will look to the rising  channel to attract buyers.


On the flip side, the Nasdaq is been pegged by 20-day MA resistance.  Here there is a clearer indication the index will make its way to channel support. Aiding this is the close presence of the 50-day MA - another potential support level.


The semiconductor index is about to see a 'Death Cross' between 20-day and 50-day MAs.  And is someway from challenging either. Growing weakness in this sector will permeate to the Nasdaq and Nasdaq 100; further evidence for continued declines (and a test of channel and/or 50-day MA support) in these indices. Technicals are also net bearish.


Finally, the Russell 2000 is caught beneath its 20-day MA like the Tech indices. But also trades above 825 support. While further downside is likely there is much stronger support than the aforementioned Nasdaq and Nasdaq 100 to work from.

Tomorrow may see a continuation of today's selling, but watch for buyers at channel support and around 825 for the Russell 2000.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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